Business
Spike in global raw material prices hurt SL’s corrugated carton industry
Sri Lanka’s corrugated carton industry is facing hard times with many manufacturers struggling to insulate themselves against global price escalations which an industry player warned posed the threat of business closure with significant challenges to their financial performance.
“The biggest challenge the industry has to grapple with is the constantly fluctuating raw material prices. There is an acute global shortage of paper due to the Covid-19 pandemic, with many manufacturers experiencing disruptions in business and supply chain”, he cautioned.
The pressure on freight has also contributed to the upsurge in paper prices by over 25%, with the upward trend expected to continue, he said.
Sri Lanka’s annual total carton production is approximately 150,000 metric tons. However, there was no adequate growth visible in the industry due to either slow or minus growth in the economy in the recent past, he noted.
A few local companies expanded production capacities by adding extra automatic box making plants anticipating economic growth in the country. This initiative saw a significant increase in manufacturing capacity, with the industry geared to accommodate new opportunities, he noted.
However, many paper manufacturers are now operating below the normal production capacity, and due to low consumption of commodities, waste paper availability has nose-dived in the backdrop of world pulp prices spiraling by around 45-50%, industry officials said.
The local corrugated carton industry predominantly caters to the B2B market. As a result, the industry has to work with very thin margins due to heavy competition among the manufacturing companies. Hence, the demand for cartons is comparatively low, they explained.
The history of the corrugated carton industry in Sri Lanka goes back to many decades. Initially, companies started manufacturing boxes with Double Facer machines and with the expansion of other industries and markets, corrugated machinery was converted into fully automated lines. At present, there are over 30 corrugated carton manufacturers, of which seven account for 70% plus market share.
Packaging is an integral part of a supply chain. The corrugated packaging industry is a vital component of the economy as it caters to the needs of many sectors in the economy, food and beverages, fast-moving consumer goods (FMCG), industrial and pharmaceuticals. E-commerce is also another key trend that has created a huge impact on corrugated carton demand. Hence, the growth of the corrugated packaging industry is not independent, but correlated with the growth of the other industries and GDP growth, they stressed.
“The appearance of the box, strength and short lead times are the key deliverables that customers want from the industry. The appearance and the strength are totally dependent on the quality of the paper used for manufacture and the printing facilities of the individual manufacturer”, the officials outlined.
A few decades ago, the machines were imported to Sri Lanka from Japan with some reconditioned units purchased. With the development of the Chinese machinery manufacturing industry, where they customized machine technology embedding robotic packaging automation, many local companies sourced their machinery from China, they further said.
Two decades ago, Chinese machinery was considered of inferior quality but today, the Chinese machines are comparable with those made in Europe, they added.
There were earlier many small-scale corrugated carton manufacturers and many of them used the Double Facer corrugating machines. In these companies, two layers were produced separately and thereafter the layers were pasted manually. As a result, the volume produced by these companies was low and the quality was also not up to the expected standards, the officials continued.
Consequently, the cost of production and the delivery lead time were also considered too high in these companies. Therefore, many of them had to quit the business, while a few others acquired automatic box manufacturing plants resulting in many Sri Lankan manufacturers opting for automatic plants, they noted.
Another key factor of the industry is that the cartons manufactured in Sri Lanka are of high-quality as quality materials are sourced from Europe, American Sub Continent, Australia and various other parts in the world, they said.
In developed economies, when customers purchase corrugated boxes, they more or less look for the bursting strength of the box, not the variety or the grammage of paper being used. However, unfortunately, in Sri Lanka most customers demand grammage and the variety of papers instead of box strength. Eventually, in most instances, the corrugated packaging produced in Sri Lanka is over specified. Sadly, this is also the case with many multinational companies operating locally.
The same companies in India use Test Liner on Outer Ply, while they demand Kraft Liner paper for this purpose in Sri Lanka, the industry officials said.
In keeping with the government’s commitment to develop local industries, there are positive expectations that the corrugator packaging industry would be reviewed and given a sustainable opportunity to grow, the officials added.
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SLT-Mobitel, the nation’s ICT and Telecommunications Service Provider recently partnered with Spotify, to mark their launch in Sri Lanka. Spotify is a paid premium music streaming app which allows subscribers to listen to music to their hearts content. Both, SLT-Mobitel Post-Paid and Pre-Paid customers will now be able to enjoy Spotify by activating a monthly recurring subscription or one-time subscription plan and access unlimited music streaming and downloading facilities.
The subscription charges will get added to the user’s customary billing, where payment will be deducted in real time. Starting from the payment date, the user will be able to access Spotify and download their favourite songs, for the next 30 days. Users who sign up for their first monthly subscription will receive an additional one month, courtesy of Spotify. The one-month subscription plan is not applicable with one-time subscription plans. SLT-Mobitel data rates, depending on the user’s respective broadband charges, will apply.
Spotify also has some exciting features that will provide SLT-Mobitel customers with the opportunity to listen to ad-free music, access millions of uninterrupted music under one platform, play any song they like, anywhere they go, and also be able to enjoy their music offline.
SLT-Mobitel customers can select their preferred premium package under four categories; Individual, Duo, Family, Student. Each category has recurring and non-recurring plans. After one month of free streaming, the package will activate once the offer period terminates. While both, the Individual and Student premiums are limited to one account user, the Duo package offers two accounts and the Family premium is accessible through six accounts. To view Spotify plans, users can log on to https://spoti.fi/3aLWvce
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by Sanath Nanayakkare
Anyone conversant with the elements of a political economy would know that Sri Lanka is using its ‘sovereign power’ to manage the different dynamics of the economy in a sustainable manner, Professor W. D Lakshman Governor of the Central Bank said on Wednesday.
“Some critics are saying that we adopt a so-called modern monetary theory. That’s not the case. In fact, Sri Lanka is using its sovereign power in a number of economic aspects to honour its external debt repayment commitments as well as to reduce its debt burden in the medium term as well as achieve resilient growth in the medium to long term, he said.
“We make policy decisions to boost our gross foreign reserves, meet our external debt servicing, to facilitate monetary expansion, to boost our GDP growth, to strengthen our current account balance and manage our domestic and external economic variables in a sustainable manner. This is not a modern monetary theory. This is an age-old tool used by central banks around the world when the circumstances demand it, he said.
“Certain trade-offs will be necessary when dealing with an economy which has a big fiscal gap to bridge. There are efforts to push Sri Lanka towards the IMF again which would in turn have influence on our policymaking. We have taken policy measures to stabilize the economy and we have adequate reserve levels to meet our debt repayments. Meanwhile, we are in negotiations with overseas central banks and multilateral agencies to further boost our reserve level and it would materialise within a matter of weeks,” he noted.
“One of the tools the Central Bank has introduced is in respect of repatriation of export proceeds into Sri Lanka and conversion of such proceeds into Sri Lankan rupees in order to strengthen the foreign exchange situation of the country,” he said.
The Governor made these remarks while delivering the keynote speech at a webinar organised by the Veemansa Initiative led by its Managing Director Luxman Siriwardene – the former Executive Director of Pathfinder Foundation.
The webinar revolved round the topic ‘External debt situation in Sri Lanka: Are we heading for a resolution or crisis?’
Professor Sirimal Abeyratne, Prof. Sumanasiri Liyanage, Dr. Nishan de Mel and Dr. Ravi Liyanage were the other speakers on the panel.
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By Hiran H.Senewiratne
CSE produced signs of a rebound yesterday with both indices closing positive, though turnover remained low. Central Bank Governor W.D Lakshman’s recent statement on managing foreign reserves gave some boost to the market yesterday, stock market analysts said.
The index experienced a zigzag movement within the early hours of trading; thereafter, it recorded a slight up-trend as it reached its intraday high of 7,439. Later, the market witnessed a down-trend at mid-day, followed by a sideways movement and closed at 7,372, gaining 43 points during the month of February, market sources said.
It is said the banking sector dominated turnover with a contribution of considerable parcel trades in Sampath Bank, Commercial Bank and HNB.
Further, the Commercial Bank’s impressive quarterly results during the recent turbulent period also built investor confidence. Commercial Bank was able to register a18 percent net interest income when other banks were reporting a decline. Its share price increased by Rs. 3 or 3.5 percent. On the previous day, its shares started trading at Rs. 85 and at the end of the day they moved up to Rs. 88. Due to the positive growth results, the bank announced a Rs. 4.40 dividend per share, plus a Rs. 2 script divergent for every share.
Further, Sampath Bank shares also appreciated in both crossing and retail. In crossings its shares appreciated by Rs. 1.At the end of the day they moved up to Rs. 154.50. In the retail market, its shares moved up by Rs. 2 or 1.3 percent. Previously, its shares fetched Rs. 154 and at the end of yesterday they moved up to Rs. 156.
Amid those developments, both indices moved upwards. The All Share Price Index went up by 104.48 points and S and P SL20 rose by 67.78 points. Turnover stood at Rs. 3 billion with four crossings. Those crossings were reported in Sampath Bank, where 3.9 million shares crossed for Rs. 602.2 million, its share price being Rs. 154.50, HNB 375,000 shares crossed for Rs. 39.4 million, its shares traded at Rs. 105, Pan Asia Power 9.5 million shares crossed for Rs. 33.2 million, its shares traded at Rs. 3.50 and Access Engineering 1.2 million shares crossed for Rs. 28.2 million; its shares traded at Rs. 24.
In the retail market top five companies that mainly contributed to the turnover were, Expolanka Rs. 450 million (10 million shares traded), JKH Rs. 205 million (1.3 million shares traded), Browns Investments Rs. 199 million (34.9 million shares traded), Sampath Bank Rs. 191 million (1.2 million shares traded) and Dipped Products Rs. 137.7 million (2.8 million shares traded). During the day 101 million share volumes changed hands in 18046 transactions.
During the day, Expolanka, the biggest contributor to the turnover, saw its share price appreciating by Rs. 6.20 or 15 percent. Its share price quoted on the previous day was Rs. 41 and at the end of trading yesterday it moved up to Rs. 47.
Sri Lanka’s rupee quoted wider at 193.50/195.50 levels to the US dollar in the spot next market on Thursday while bond yields remained unchanged, dealers said. The rupee last closed in the spot market at 194.50/195.00 to the dollar on Wednesday.
